Correlation Between Ciena Corp and AAP
Can any of the company-specific risk be diversified away by investing in both Ciena Corp and AAP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ciena Corp and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ciena Corp and AAP Inc, you can compare the effects of market volatilities on Ciena Corp and AAP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ciena Corp with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ciena Corp and AAP.
Diversification Opportunities for Ciena Corp and AAP
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ciena and AAP is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Ciena Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ciena Corp are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Ciena Corp i.e., Ciena Corp and AAP go up and down completely randomly.
Pair Corralation between Ciena Corp and AAP
Given the investment horizon of 90 days Ciena Corp is expected to generate 17.82 times less return on investment than AAP. But when comparing it to its historical volatility, Ciena Corp is 12.82 times less risky than AAP. It trades about 0.07 of its potential returns per unit of risk. AAP Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.26 in AAP Inc on August 31, 2024 and sell it today you would lose (0.24) from holding AAP Inc or give up 92.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ciena Corp vs. AAP Inc
Performance |
| Timeline |
| Ciena Corp |
| AAP Inc |
Ciena Corp and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ciena Corp and AAP
The main advantage of trading using opposite Ciena Corp and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ciena Corp position performs unexpectedly, AAP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AAP will offset losses from the drop in AAP's long position.| Ciena Corp vs. Extreme Networks | Ciena Corp vs. Hewlett Packard Enterprise | Ciena Corp vs. NETGEAR | Ciena Corp vs. Motorola Solutions |
| AAP vs. Baylin Technologies | AAP vs. Viavi Solutions | AAP vs. SatixFy Communications | AAP vs. Electronic Systems Technology |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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